With the shares trading at more than 25% to peers there is the perception that this is a late cycle heavy industrial business. However, global steel production was up +31% in first four months and the Group’s positive interim management statement on 26th April suggests that the material discount to peers looks overdone

THE BUSINESS

Cookson Group (LON:CKSN) is an industrial materials business specializing in Industrial Ceramics (58% of sales), Electronics consumables (27%) and Precious Metals (15%). The Group aims to add value to their customers' businesses by providing products, processes and services that allow them to increase the efficiency and quality of their operations. Cookson employs 15,000 people in more than 40 countries, selling its products in over 100 countries.

Ceramics (58% of sales)

The Vesuvius ceramics businesses mainly for steel industry (57%) put together with the Foseco ceramics operation that satisfied the Foundry market (28%). 38% Europe, 23% NAFTA, 28% Asia Pac and 12% ROW -  a good breakdown. Products are all consumables so depend on steel and foundry output. Big 30% falls in 2009 but now forecast to recover c.10% this year and 5% next year. End markets are varied with automotive steel and heavy engineering two of the biggest areas at opposite end s of the cycle.

Electronics (27%)

Business supplies consumables for PCBs, semi conductor and electroplating industry. E.g. solders/fluxes etc.  This business is much more biased to Asia Pac (43%) as this is where the market is. Europe 29%, US 23%.  End markets are all early cycle ( 76% consumer electronics, and 24% car electronics)

Precious Metals (15%)

A much smaller and more stable business. It actually saw higher profits in 2009. It supplies precious metals (Gold, Silver and platinum) and semi finished products to the jewellery trade to designers, wholesalers and retailers. 50% Europe, 50% US  and some export to Asia.

PEER GROUP - other industrial companies:

Tomkins (LON:TOMK)  @245p Mkt cap £2.2bn:   PE 12.2x for 2010  (10.2x 2011)

Invensys (LON:ISYS)  @273p Mkt cap £2.2bn:   PE 12.2x for 2010  (10.8x 2011)

GKN (LON:GKN)  @125p Mkt cap £2.0bn:   PE 9.9x for 2010  (7.5x 2011)

Imi (LON:IMI)  @648p Mkt cap £2.1bn:   PE 11.2x for 2010  (9.9x 2011)

Weir Group (LON:WEIR)        @914p Mkt cap £1.9bn:   PE 12.6x for 2010  (11.5x 2011)

SOME TRADE THOUGHTS

•         Strong value…

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